AI and Geoeconomics

Introducing the AD-AS model The AD-AS or Aggregate Demand-Aggregate Supply model is a macroeconomic model that explains price level and output through the relationship of aggregate demand and aggregate supply. It is based on the theory of John Maynard Keynes presented in his work The General Theory of Employment, Interest, and Money . Two variables are represented by the model. The quantity variable on the horizontal axis is now represented by real gross domestic product (Y) . This is the measure of the true value of annual national production, and is adjusted for inflation. The level of price inflation P is represented on the upright axis. A suitable economic statistic for this value would be the rate of inflation as determined by the Implicit Price Deflator, the value used to compute real GNP from nominal, inflated GNP. Aggregate demand is simply the total of all levels of spending in the national income accounts; consumption, investment, government purc...

King, Robert G. & Levine, Ross, 1993. "Finance, entrepreneurship and growth: Theory and evidence," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 513-542, December. Read full paper here . Abstract - Introduction How do financial systems affect economic growth? We construct an endogenous growth model in which financial systems evaluate prospective entrepreneurs, mobilize savings to finance the most promising productivity-enhancing activities, diversify the risks associated with these innovative activities, and reveal the expected profits from engaging in innovation rather than the production of existing goods using existing methods. Better financial systems improve the probability of successful innovation and thereby accelerate economic growth. Similarly, financial sector distortions reduce the rate of economic growth by reducing the rate of innovation. A broad battery of evidence suggests that financial systems are important f...